Toyota's financing arm will pay as much as $21.9 million to black and Asian borrowers who paid more for auto loans than whites, settling allegations of discrimination by federal regulators.
Toyota Motor Credit Corp. in Torrance had been under investigation by the Department of Justice and the federal Consumer Financial Protection Bureau since 2013. It had been targeted as part of a broad probe into auto lending practices that has led to similar settlements with other major auto credit companies.
The agencies didn't find that Toyota Motor Credit discriminated directly, but rather that the automaker's dealerships increased interest rates more for black and Asian borrowers than for whites.
Lenders like Toyota Motor Credit offer a base rate for buyers based on their credit-worthiness. Dealerships then are allowed to tack on additional interest -- known as a dealer markup.
Regulators didn't take issue with the markups themselves, but rather that dealerships added extra interest to loans for black and Asian borrowers.
So dealers would charge black and Asian borrowers more for the same loan, and Toyota looked the other way.
"No consumer should be forced to pay more money for a loan because of their race or national origin,” U.S. Atty. Eileen M. Decker of the Central District of California said in a statement announcing the settlement.
Investigators found that black borrowers paid 0.27 percentage point more for loans than whites with similar loans and credit histories. Asian borrowers paid 0.18 percentage point more.
The extra interest meant that black borrowers, on average, paid as much as $200 extra over the course of their loans, while Asian borrowers paid $100 extra. It's not clear how many borrowers were affected, but the size of the settlement implies more than 100,000 borrowers.
One hundred thousand people, mind you. An extra hundred bucks times a hundred thousand loans is ten million. And the best news? This is a widespread practice in the auto loan, mortgage loan, and bank loan industries.
If you're black, or Asian, or Hispanic, companies rip you off and you pay more. It's accepted practice, and something the CFPB was created to fight.
No wonder then that Republicans want to get rid of the agency, right?